Lending news for the Spanish market

Spanish banks

Spanish banks have been hit by a court judgement in the last couple of months that has not only outlawed floor rates but has stated that compensation should be paid for at least those mortgages in Spain completed since 2013.

The judgement will hit earnings and in an effort to avoid future problems many of the banks in Spain are looking at growth strategies outside Spain.

A few of the lenders are proactively approaching mortgagees with floor rates and offering good long term fixes for the benefit of signing away any rights to future action against them.

House sales in February

According to both the notary offices and land registry house sales continued to grow in February. Average price per square meter fell by a small amount but overall sale of homes climbed year on year and against January 2016.

Whether this trend will continue due to the political uncertainty etc will remain to be seen. Certainly the Spanish banks relaxed criteria for lending in the quarter according to the findings of the Bank of Spain. The relaxation of criteria was to help keep mortgage growth moving forward as demand whilst up from previous levels is still seen as weak.

Mortgages in Spain

Lending levels grew both for those registered at land registry and signings within the month of February. Average interest rates rose slightly reflecting the shift from variable rate products to slightly more expensive but more stable long term fixes. Best buys reflect this.

The percentage of loans registered as fixed rate product type was the highest in history in February and should continue to grow.

Net Outflows

More loans were redeemed in the month than new loans constituted so the challenge remains in Spain the same. How to grow the loan books.

Read the full article:- Mortgage in Spain data improves

January mortgage news is a mixed bag

Mortgage levels for January

Both the INE and the Notary offices published this month the New Year first month data for mortgages in Spain.

Whilst in terms of both numbers of loans and capital lent both reporting bodies were showing a year on year increase for loans registered at land registry in the month the increase over Decembers results were the lowest for a few years.

Wider data

The wider data which is published by the INE and includes matters such as average interest rates and mortgage product types indicated a continuing trend toward fixed rate loans. Whilst the numbers are still very small the last 12 months have seen a shift from around 5% of loans completing on this basis to now just over 10%.

Average loan sizes came under some pressure in the month although overall they continue each month to grow. This coincided with a reported 2% increase in average price per meter square being paid by purchasers owning property in Spain.

Madrid leads the way

Regionally the strongest areas in the month of January were Madrid and Valencia. Some of the coastal and Island regions who had very strong performance through 2015 fell back slightly.
Whether this is a one month blip or a trend toward less mortgage applications from foreign buyers due to uncertainty surrounding the Political arena in Spain will remain to be seen.

Net loan outflows

For Spanish Banks one area of good news was that the gap between the amount of loans they lost due to cancellations or redemptions and the amount of new loans they granted narrowed to less than. 1,000.

Read the full article : - Spanish mortgage data for beginning of year is mixed news

Mortgage application process Spain

When is a mortgage offer not an offer

Whilst the application process for a Mortgage in Spain closely resembles that of other countries the process of pre-approval can be confusing and lacks robustness.

Apart from one lender no Banks in Spain have sophisticated scoring systems that allow them to pre-approve loan by checking key parameters.

Scoring systems

Sabadell Bank who do have a scoring system which allows for quick responses on what it is likely they can offer do not however use this scoring system in the way in which a UK lender might and an applicant used to pre-approvals from other countries should proceed with caution when they are told they are approved and on what basis.

In Spain only fully packaged applications that have been passed to and reviewed by the Risk Teams at either regional or national level are deemed to be fiscally approved. Any other information however official it may appear given at branch level is just an illustration of what could be posible and is not in any way shape or form an approval to lending.

Valuation first

Many Banks in Spain will not pass to their underwriting teams a documented application for fiscal approval until a valuation is paid for and the result is back to be added to the file. This can mean a valuation fee must be paid before an applicant even knows if they are personally approved and meet bank criteria.

Avoid the pitfalls

Most Banks, if you insist on it or are using an experienced broker will provide, without valuation a fully underwritten approval to lend but just because documents have been submitted do not assume it has been seen by Risk. Often branch staff will just review the file and state that they see no problems.

Language barriers and a miss-understandings over how far in the process the application is can cause confusion.

Read the full article :- Applying for a Mortgage in Spain

Loan reporting for Spain 2015 final figures

February mortgage reports

Data published in February from the various reporting bodies in Spain show that both mortgages in Spain and house sales have made a slow but steady recovery during 2015.

The INE who reports on registered Spanish loans and registered transfers of property titles rather than signings showed a higher year on year increase than the Notary offices. This would seem to indicate that signings from the back end of 2014, registered in early 2015, were higher than for the same months in 2015.

2015 results

Overall during the year mortgage capital lent grew by a higher percentage than numbers of new loans granted. The higher increase was due to the average loan size increasing during 2015. Cataluna for example saw growth of over 60% when relating it to capital lent but only a 37% increase in numbers of loans. Madrid on the other hand was the only region who saw a higher level of growth on numbers of loans to capital lent. 

In general coastal areas and those most attractive to foreign buyers saw the best level of growth both in terms of financial facilities and house sales.

Rates and product types

The average rate by which Spanish Mortgages were granted increased for the first time in many months during December despite the Euribor declining  slightly. This may be due to the ongoing trend toward fixed rate product types. Fixed rate best buys may provide a higher immediate rate but will provide good value for money and stability in the medium to longer term.

Net loan outflows

Mortgage in Spain redemptions were 55,000 higher than new loans constituted so net outflows remain the main challenge for Spanish Banks going forward.

Read the full article:- Home loan results for December and 2015 in Spain

Mortgages in Spain news for 2016

Mortgage news.

With 2015 seeing improvements to Mortgage in Spain facilities the Spanish Banks continue to look to push forward in 2016.

Key changes include lenders who have been out of the non resident market for many years coming back in with a bang, and more flexible approach to pricing and risk assessment.

Fixed rate options

After years of promoting variable rates only, many lenders in Spain are now offering and will continue to offer in 2016 fixed rate product. With rates as low as 2.75% for a full 20 years applicants should consider fixed rate options rather than variable if they intend to hold the loan in the medium to long term.

Loan to values

More Spanish lenders have or are considering adding themselves to the list of lenders that offer non fiscal residents of Spain up to 70%. In 2015 most limited their offering to 60% but during 2016 it is most likely 70% will become standard for a number of lenders.

Spanish Banks

Spanish Banks have in general doubled targets for 2016 and remain very positive about the purchase and borrowing market despite some of the outside pressures in Spain and political uncertainty. It will be the aim of the Banks to finally reverse years of net lending outflows each month during 2016.

Overview

Clients going through an application process in Spain during 2016 should experience a more want to do attitude from the risk departments as the power shifts from underwriting to the commercial teams. Whilst things will not return to the rather lax assessment of criteria from the boom days a more pragmatic approach to mortgage applications will be the name of the game.

Read the full article:- What does 2016 hold for Spanish Mortgages  

House sales and loans move forward in Spain

Monthly reporting figures

Data out from the two reporting bodies the INE or statistical office and the Notaries in Spain show that mortgage lending and the home sales grew in November.

The pace by which both grew did slow slightly when considering seasonal adjustments and previous months within 2015.

Notary Offices

According to the Notary offices the number of house sales reached 34,918 in November and 25,681 new loan agreements were signed. 

Average price per meter squared declined slightly at € 1.219 after two months of small increases.

Average loan amounts reached € 144.223 up 5.5% on the same month of the previous year.

INE

Data from the INE which looks at contracts actually registered with land registry showed a similar pattern.

Sales of homes was 13.7% up on the previous year with 28,733 sales recorded.

Mortgage lending increased on the same month of last year but dropped back against October of 2015.

Fixed rate mortgage types continued to show a higher share of the overall loan market.

Overall both number of loans and capital lent has steadily increased during 2015 against a low level of transactions in the last few years. 

Resales and new builds

Both sales and mortgages have seen the increases they have against a growing second hand market. Resales are outstripping new build sales by quite someway. New build sales have steadily fallen for the last 19 months.

Read the full article :- Loan levels and house sales in Spain for November

Variable rate or fixed rate which is best

Fixed rates versus variable rates

Currently in Spain for the first time Spanish Banks are promoting fixed rate mortgage products.

Previously fixed rates have been difficult to obtain and have not been competitive so the choice of what product type to elect for has been an easy one when making an application.

The choice now has widened with a range of good fixed rates being offered starting at 2.45% for a 10 year rate and 2.75% for 20 years. In general the fixed rate products are for the full term it is not usual as it is in the UK to have a fixed/ variable mixed.

Up sides of fixed rate products are stability of payment during the term of the loan and a hedge against rate increases in the future.

Current market conditions

Whilst the variable rate remains below by an average of 1% that of the fixed rates this is only because the 12 month Euribor is at a historic low. For January the 12 month Euribor is 0.059% but it has been as high as 5.75% and on average across the last 14 years it will have sat at 2.5%. 

With margins above Euribor for variable rate Spanish loans being in the region of 2% to 2.5% it would not take long in an increasing rate environment for the variable to meet and then exceed the overall rates provided by the better fixes. 

Choosing the right product type

Fixed rate products can change between application to offer there is no way during the application process currently to secure the rate you are applying for. Fixed rates also have higher early redemption penalties than their variable counterparts giving less flexibility for those mortgage holders who know they will want to make overpayments or reduce the loan term.

Whilst much will depend finally on personal choice and personal circumstances as to whether a fixed rate is the right route at least there is now a viable alternative in Spain.

Read the full article :- What mortgage product type is the best in Spain